Post by lizaseo11 on Nov 8, 2024 21:46:03 GMT -8
According to statistics, it is 5 times cheaper to retain a client than to attract a new one. At the same time, a potential client will buy your product with a probability of 5-20%, and a regular client with a probability of 60-70%. Therefore, successful companies invest money in loyalty: they improve the product and its support, develop communities and social networks, strengthen the brand, and develop loyalty programs. We will talk about the latter in the article.
What is a loyalty program
A loyalty program is a system of bonus rewards and privileges for customers that helps increase the number of repeat sales, encourages more frequent interaction with the brand, and increases the company's profits.
You could say it's a deal: a business provides a person with bonuses and privileges, and the person pays with personal data, loyalty, recommendations and repeat purchases.
what is loyalty program.png
Benefits of Loyalty Programs for Business
It's cheaper to hold
The business does not have to spend money and other resources to attract the user again. If the customer's previous experience is positive, it is easier for him to buy the desired product in a familiar store. The search can take time and not meet expectations.
Personalization
You can learn more about your product users, build communications more effectively, and get useful feedback. Personalized advertising is better perceived by customers and encourages them to take targeted actions.
More profit
Businesses can use user data for cross-selling and up-selling. Examples include extended warranty when buying a phone, discounts on headphones and cases.
Strong brand
A loyalty program shopify website design can create an emotional connection with the user. Also, regular customers can become a source of recommendations for friends and family.
What types of loyalty programs are there?
According to TelecomDaily , Russian families use an average of 17 loyalty programs:
Discount
The mechanism is simple: received a card → bought with a discount. Retailers can sell discount cards, as well as issue them for free for purchases of a certain amount or without conditions. For example, the hobby hypermarket chain Leonardo issues a regular customer card for a one-time purchase of 1,500 rubles.
The discount can be fixed or cumulative — it increases when the client spends a certain amount. For example, the Rive Gauche chain of stores gives away cards with a 5% discount for free. But if the buyer wants a gold card, he needs to spend 10,000 ₽.
Cumulative discount card "Rive Gauche".png
Bonus
For any target action — subscribing to a newsletter or making a purchase — the business awards bonuses or points. Bonuses can then be converted into discounts, gifts, and other privileges. The most common mechanics: the client makes a purchase → receives part of the amount to their account → writes off points in subsequent purchases. For example, “Rainbow Smile” converts bonuses into rubles, which can be used to pay up to 100% of the purchase cost.
Bonus program "Rainbow Smile".png
In the loyalty program from X5 Club, you can pay with points up to 50% of the purchase price at the rate of 10 points = 1 ₽.
Loyalty program "X5 Club".jpg
Small businesses often use a simplified version of the bonus program: buy 5 cups of coffee and get the sixth one for free. The mechanics are as follows: the user receives a stamp card → buys a certain amount of goods → receives a bonus.
Bonus program of the coffee shop chain.jpg
Multi-tiered
The more a client uses the company's services, the more privileges they receive. Multi-tier mechanics are often used by chain hotels and airlines. For example, the French hotel chain Accor offers loyalty program participants a system of elite levels depending on their expenses and nights spent:
Accor loyalty program.png
By upgrading your level, you can get a free breakfast, upgrade your room category, or gift your status to another person.
Sportmaster has a similar mechanic: the more the user buys, the more privileges he has.
Loyalty program "Sportmaster".png
Paid
It operates on a subscription basis — the user pays for participation and receives privileges. This is how Tinkoff Pro works: for 199 ₽ per month, the bank offers increased cashback, free communication and transfers without commission.
There is also a paid loyalty system for Ozon customers — Ozon Premium. A premium subscription costs 199 ₽ per month. For this money, the customer gets a priority support line, special delivery rates, special prices and access to closed sales.
Example of a paid loyalty program Ozon Premium
Cashback
The business returns a partial purchase price to the client in rubles or discount points. The mechanics are often used in banks: a person makes a purchase → receives cashback depending on the category → receives money or points to the account once a month.
Usually the percentage is fixed, but you can choose categories with increased cashback. This is how Tinkoff works:
Tinkoff cashback.png
"SberSpasibo" returns cashback in bonuses for purchases made with the card. They can be exchanged for rubles, spent on purchases from the bank's partners or used to reimburse payments, for example, for utilities.
Example of SberSpasibo loyalty program
Umbrella
Combines several products or brands of a large company. This is how Yandex.Plus works: the user pays for a subscription → uses the corporation's services → gets points → spends them within the ecosystem.
Yandex plus.png
Stages of developing a loyalty program in a company
The algorithm for developing a loyalty program includes analytics, defining goals, mechanics, communication channels, and evaluating effectiveness after launch.
stages of loyalty program development, example
Study
Before developing a customer loyalty program, study the needs and desires of your customers, analyze the market and competitors, and research successful cases.
The research will help you determine the value of your loyalty program and answer questions such as:
— Why do people use your product?
— What mechanics will attract them more?
— How will points be accumulated?
— Will the discount increase?
Target
Determine what goals you want to achieve with your loyalty program, such as increasing repeat purchases or reducing acquisition costs.
Mechanics
Choose the mechanics of the loyalty program. It can be a simple option with stamps on a card or a multi-level complex system with gamification. Everything depends on the capabilities of the business and analytics. Then it remains to calculate the financial model and prepare the infrastructure for deployment.
Testing
If the loyalty program does not pay off, it will have to be closed. This may cause dissatisfaction among users - first they gave discounts, then took them away. Therefore, all hypotheses regarding mechanics and rules need to be tested. For example, using corridor testing or a/b testing.
Launch
Notify customers about the launch in their usual communication channels: SMS, messengers, push notifications, e-mail.
Efficiency
After launch, you need to analyze the key indicators of the loyalty program to assess the profitability for the business. What to look for:
- how many people return for a repeat purchase - the repeat purchase rate;
- how actively users are involved in the program and use it - the engagement rate;
— how many participants are in the program — participation coefficient;
— the percentage of customers who interact with the brand over a period of time — customer retention rate.
Why a Loyalty Program Doesn't Work: Common Mistakes
Small user base
To make a loyalty program pay off, you need a large user base. For example, in retail, this could be 100,000 people. If you have few clients, the effect of the investment will be insignificant. For example, 100 people with an increase in the average check of 1000 ₽ by 5% will bring only 5000 ₽.
Complex conditions
If you need to perform too many actions to participate in the program, the conditions are not clearly described, then there is a risk of not attracting participants. No one wants to wade through officialese, legalisms, footnotes, tooltips. Words from the world of dusty offices repel users. The client tries to figure it out, drowns in details and loses the thread, and then the interest.
Lack of purpose
If a loyalty program has no purpose, then the business does not understand the needs of its customers and is wasting resources.
Low value of privileges
To promote a business with a loyalty program, it must be useful. And what is the use of 10,000 bonuses if you can’t even buy a chocolate bar with them? Probably, such value will cause negativity in the user and thoughts that his loyalty is not appreciated.
"Gray" mechanics
For example, bonuses with a short validity period. On the one hand, there is no deception here. But it can happen like this: the client made a large purchase → received a lot of points → counted on them → they suddenly burned out → the client got upset and decided that his loyalty is not appreciated.
Lack of analytics
If a business does not test new hypotheses, makes decisions intuitively, and does not know its customer.
Resume
Almost every market participant has a loyalty program: retailer, bank, restaurant, tour operator or carrier. It is launched to fulfill specific business tasks:
— collect customer data and correctly segment offers to your audience;
— increase the average bill and frequency of purchases;
- retain customers and stand out from competitors.
What is a loyalty program
A loyalty program is a system of bonus rewards and privileges for customers that helps increase the number of repeat sales, encourages more frequent interaction with the brand, and increases the company's profits.
You could say it's a deal: a business provides a person with bonuses and privileges, and the person pays with personal data, loyalty, recommendations and repeat purchases.
what is loyalty program.png
Benefits of Loyalty Programs for Business
It's cheaper to hold
The business does not have to spend money and other resources to attract the user again. If the customer's previous experience is positive, it is easier for him to buy the desired product in a familiar store. The search can take time and not meet expectations.
Personalization
You can learn more about your product users, build communications more effectively, and get useful feedback. Personalized advertising is better perceived by customers and encourages them to take targeted actions.
More profit
Businesses can use user data for cross-selling and up-selling. Examples include extended warranty when buying a phone, discounts on headphones and cases.
Strong brand
A loyalty program shopify website design can create an emotional connection with the user. Also, regular customers can become a source of recommendations for friends and family.
What types of loyalty programs are there?
According to TelecomDaily , Russian families use an average of 17 loyalty programs:
Discount
The mechanism is simple: received a card → bought with a discount. Retailers can sell discount cards, as well as issue them for free for purchases of a certain amount or without conditions. For example, the hobby hypermarket chain Leonardo issues a regular customer card for a one-time purchase of 1,500 rubles.
The discount can be fixed or cumulative — it increases when the client spends a certain amount. For example, the Rive Gauche chain of stores gives away cards with a 5% discount for free. But if the buyer wants a gold card, he needs to spend 10,000 ₽.
Cumulative discount card "Rive Gauche".png
Bonus
For any target action — subscribing to a newsletter or making a purchase — the business awards bonuses or points. Bonuses can then be converted into discounts, gifts, and other privileges. The most common mechanics: the client makes a purchase → receives part of the amount to their account → writes off points in subsequent purchases. For example, “Rainbow Smile” converts bonuses into rubles, which can be used to pay up to 100% of the purchase cost.
Bonus program "Rainbow Smile".png
In the loyalty program from X5 Club, you can pay with points up to 50% of the purchase price at the rate of 10 points = 1 ₽.
Loyalty program "X5 Club".jpg
Small businesses often use a simplified version of the bonus program: buy 5 cups of coffee and get the sixth one for free. The mechanics are as follows: the user receives a stamp card → buys a certain amount of goods → receives a bonus.
Bonus program of the coffee shop chain.jpg
Multi-tiered
The more a client uses the company's services, the more privileges they receive. Multi-tier mechanics are often used by chain hotels and airlines. For example, the French hotel chain Accor offers loyalty program participants a system of elite levels depending on their expenses and nights spent:
Accor loyalty program.png
By upgrading your level, you can get a free breakfast, upgrade your room category, or gift your status to another person.
Sportmaster has a similar mechanic: the more the user buys, the more privileges he has.
Loyalty program "Sportmaster".png
Paid
It operates on a subscription basis — the user pays for participation and receives privileges. This is how Tinkoff Pro works: for 199 ₽ per month, the bank offers increased cashback, free communication and transfers without commission.
There is also a paid loyalty system for Ozon customers — Ozon Premium. A premium subscription costs 199 ₽ per month. For this money, the customer gets a priority support line, special delivery rates, special prices and access to closed sales.
Example of a paid loyalty program Ozon Premium
Cashback
The business returns a partial purchase price to the client in rubles or discount points. The mechanics are often used in banks: a person makes a purchase → receives cashback depending on the category → receives money or points to the account once a month.
Usually the percentage is fixed, but you can choose categories with increased cashback. This is how Tinkoff works:
Tinkoff cashback.png
"SberSpasibo" returns cashback in bonuses for purchases made with the card. They can be exchanged for rubles, spent on purchases from the bank's partners or used to reimburse payments, for example, for utilities.
Example of SberSpasibo loyalty program
Umbrella
Combines several products or brands of a large company. This is how Yandex.Plus works: the user pays for a subscription → uses the corporation's services → gets points → spends them within the ecosystem.
Yandex plus.png
Stages of developing a loyalty program in a company
The algorithm for developing a loyalty program includes analytics, defining goals, mechanics, communication channels, and evaluating effectiveness after launch.
stages of loyalty program development, example
Study
Before developing a customer loyalty program, study the needs and desires of your customers, analyze the market and competitors, and research successful cases.
The research will help you determine the value of your loyalty program and answer questions such as:
— Why do people use your product?
— What mechanics will attract them more?
— How will points be accumulated?
— Will the discount increase?
Target
Determine what goals you want to achieve with your loyalty program, such as increasing repeat purchases or reducing acquisition costs.
Mechanics
Choose the mechanics of the loyalty program. It can be a simple option with stamps on a card or a multi-level complex system with gamification. Everything depends on the capabilities of the business and analytics. Then it remains to calculate the financial model and prepare the infrastructure for deployment.
Testing
If the loyalty program does not pay off, it will have to be closed. This may cause dissatisfaction among users - first they gave discounts, then took them away. Therefore, all hypotheses regarding mechanics and rules need to be tested. For example, using corridor testing or a/b testing.
Launch
Notify customers about the launch in their usual communication channels: SMS, messengers, push notifications, e-mail.
Efficiency
After launch, you need to analyze the key indicators of the loyalty program to assess the profitability for the business. What to look for:
- how many people return for a repeat purchase - the repeat purchase rate;
- how actively users are involved in the program and use it - the engagement rate;
— how many participants are in the program — participation coefficient;
— the percentage of customers who interact with the brand over a period of time — customer retention rate.
Why a Loyalty Program Doesn't Work: Common Mistakes
Small user base
To make a loyalty program pay off, you need a large user base. For example, in retail, this could be 100,000 people. If you have few clients, the effect of the investment will be insignificant. For example, 100 people with an increase in the average check of 1000 ₽ by 5% will bring only 5000 ₽.
Complex conditions
If you need to perform too many actions to participate in the program, the conditions are not clearly described, then there is a risk of not attracting participants. No one wants to wade through officialese, legalisms, footnotes, tooltips. Words from the world of dusty offices repel users. The client tries to figure it out, drowns in details and loses the thread, and then the interest.
Lack of purpose
If a loyalty program has no purpose, then the business does not understand the needs of its customers and is wasting resources.
Low value of privileges
To promote a business with a loyalty program, it must be useful. And what is the use of 10,000 bonuses if you can’t even buy a chocolate bar with them? Probably, such value will cause negativity in the user and thoughts that his loyalty is not appreciated.
"Gray" mechanics
For example, bonuses with a short validity period. On the one hand, there is no deception here. But it can happen like this: the client made a large purchase → received a lot of points → counted on them → they suddenly burned out → the client got upset and decided that his loyalty is not appreciated.
Lack of analytics
If a business does not test new hypotheses, makes decisions intuitively, and does not know its customer.
Resume
Almost every market participant has a loyalty program: retailer, bank, restaurant, tour operator or carrier. It is launched to fulfill specific business tasks:
— collect customer data and correctly segment offers to your audience;
— increase the average bill and frequency of purchases;
- retain customers and stand out from competitors.